President Trump issued an Executive Order imposing economic sanction on the initial coin offering (“ICO“) by the Government of Venezuela, called the Petro coin (the “Petro ICO“).
The Executive Order makes it illegal to engage in transactions, dealings or financings in connection with the Petro ICO, which would include buying, selling, trading, marketing, listing or facilitating, in any way, the Petro ICO by any US person or any person in the US.
It is also illegal to attempt to violate the Petro ICO sanctions, as well as to conspire to violate the sanctions or to avoid or evade them (sanctions avoidance that occurs, for example, when money is moved through a secondary country to hide its illegal origin).
World’s 1st Sanctions Against a Digital Currency
The economic sanctions against the Petro ICO are the first sanctions issued in the world against a digital currency.
The Petro ICO is concerning from a financial crime perspective for a number of other reasons in our opinion because:
- It’s the issuance of a securities without securities law considerations or disclosure to protect investors;
- It is represented to investors as allegedly backed by both oil and gold but is likely backed by neither;
- It is available for sale to non-Venezuela citizens provided they pay in Euros, Yuan, Rubles and Turkish Lira;
- One can also buy the Petro ICO with Bitcoin, Ether and NEM. The digital currency NEM has its own controversy – it was allegedly the victim of theft from hacking. A public company based in Vancouver issued a promotional press release alleging that it had traced millions of dollars worth of that stolen NEM to a Vancouver digital currency exchange but no law enforcement agency followed through, if true, to prosecute the exchange or to obtain the identity of the wallet holder, or to forfeit the assets as proceeds of crime. No Canadian digital currency exchange publicly lists NEM for trading which means that the public company that issued the promotional press release had information in respect of the OTC trades of that exchange, which is only possible if the information is inside information but it also means that the Petro ICO can be OTC traded in Vancouver at that unidentified exchange, to avoid US sanctions law;
- According to the Petro ICO White Paper, Venezuela will make the Petro coin available all around the world (irrespective of sanctions law impediments); and
- Venezuela claims it has already sold over $5 billion Petro coins to people in over 127 countries but its unclear how anyone will be able to hold them or cash out with sanctions in place. It also means that such sales were OTC which is problematic because in Vancouver where NEM can apparently be traded OTC to buy the Petro ICO, OTC trades occur without visibility between an exchange and a party, or as between two parties.
NEM Confirms that Venezuela Is Using its Blockchain
There’s more to the NEM connection with the Petro ICO – according to the Venezuelan government’s White Paper for the Petro ICO, NEM is the Blockchain used for the coin. NEM went so far as to publish on Twitter that the Venezuelan government is using NEM for the Petro coin, which would amount to the NEM foundation providing transactions that are outright prohibited and that would cause its de-risking by virtue of correspondent banking law.
The official website for the Petro ICO is here.
All you need to do to buy into the Petro ICO, is to scan any ID, fake or real, to the government website and send them your cash or Bitcoin. They even take funds from Canadians and in USD, according to the official website.
But please don’t buy any.